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Question regarding retained earnings

Hi,guy, just wanna make sure which one of the following is correct:  (1)beginning retained earnings+ NI-Dividend paid=End retained earnings   (2)beginning retained earnings+ NI+contributed captial-Dividend paid=End retained earnings   Is it one of them correct or both? Please help and thanks in advance.

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HG wrote:
Hi,guy, just wanna make sure which one of the following is correct:  (1)beginning retained earnings+ NI-Dividend paid=End retained earnings   (2)beginning retained earnings+ NI+contributed captial-Dividend paid=End retained earnings   Is it one of them correct or both? Please help and thanks in advance.

Neither is correct.

(1) is closer than (2).

It’s properly:

Ending R/E = Beginning R/E + NI – Dividends Declared

Not dividends paid.

Contributed capital appears in Preferred Stock, Common Stock, or Additional Paid-In Capital, not Retained Earnings.

When dividends are declared, they are removed from Retained Earnings and put into Dividends Payable (a liability).  When they’re paid, the liability is removed, and the cash is removed.

Simplify the complicated side; don't complify the simplicated side.

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Thanks u very much! then what about the following:  Beginning equity + NI +OCI + contributed Captial - Div declared= Ending equity.   Is this right?   thanks again.

HG wrote:
Thanks u very much! then what about the following:  Beginning equity + NI +OCI + contributed Captial - Div declared= Ending equity.   Is this right?   thanks again.

Not OCI, ΔOCI.

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/

You’ve been very helpful. thanks alot!

HG wrote:
You’ve been very helpful. thanks a lot!

You’re quite welcome.

(Note: “a lot” it two words, not one.)

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/